Does fear work?

Oliver Letwin has been doing some blue sky thinking.The Guardian reports him as saying that it is

only through "some real discipline and some fear" of job losses that excellence would be achieved in the public sector.

I'm not sure Letwin really believes this. If he did, he would be also advocating introducing fear into corporate boardrooms, because there is at least some evidence that fines work better than bonuses in stimulating good performance. Funnily enough, though, he seems silent on this. He seems to subscribe to the asymmetric theory of motivation: bosses are motivated by big money, but workers are motivated by fear.
Sadly, though, there are three reasons to doubt the latter half of this theory:
1. The Yerkes-Dodson effect. Yes, sometimes fear can inspire great achievements. But it can also cause stress and choking.
2. Even if fear does induce more effort, this effort might be misdirected, unless the institutional structure is very carefully designed. Fear of job loss might simply lead to more gaming of the system. For example, if teachers are sacked if their students perform poorly, the result might not be better teaching, but rather teaching to the test, the expulsion of bad students, or a focus on students of borderline ability, to the neglect of most of the class. As Daniel Pink wrote in Drive - one of those fashionable behavioural economics books that the Tory party is supposed to be interested in:

Instead of restraining negative behaviour, rewards and punishments can often set it loose - and give rise to cheating, addiction and dangerously myopic thinking.

3. Sacking bad workers can crowd out other motives - be they a sense of vocation or the gift exchange arising from the invisible handshake. Workers who see an under-performing colleague sacked are as likely to withdraw goodwill from management as they are to be spurred to work harder. And if, say, a good teacher working in a bad school fears for his job, he's likely to just jump ship, causing the bad school to get worse.
It's not just Gneezy and Rustichini's well-known paper (pdf) on Israeli kindergartens that shows how explicit penalties can crowd out pro-social motivations. A study of Norwegian hospitals found the same thing.
All of this is consistent with one big fact about productivity (pdf) in the private sector - that lots of productivity growth (maybe almost all) comes not from incumbent suppliers upping their game, but rather by the fact of entry and exit. If Letwin had focused just on this point, I'd have little problem. But bringing class war and bad psychology into it is just silly.   

Comments

[gastro george]

Letwin is an idiot, but what concerns me is that this is part of a pattern - the government seems hell-bent on provoking the public sector unions into industrial action. Presumably they think it's a vote winner.

[Robs]

Well if neither Santa Claus nor Darth Vader style management works, maybe give up on the whole civilization thing then eh?

[Keith]

These Tories seem like a bunch of bullies and dimwits. So no change there then; same as ever! I blame those f***ing public schools as Tony Crossland put it.

I thought humanistic psychology had established years ago that being nice to people was the best way to raise efficiency?

In the USSR they sometimes shot bosses of state firms in efficiency drives. And we all know how well that worked don't we?

[pablopatito]

The public sector has been living with "real discipline and some fear" of job losses for a number of years. Redundancies, targets, bonus related pay - these are all common in the public sector and were mostly implemented by the last Labour government.

[Charles Wheeler]

An interesting view on incentives:
http://goo.gl/st87A

[Charles Wheeler]

oops... wrong link:
http://goo.gl/XIEdH

[Opinion Prole]

I think what the man wants is more discipline and less getting away with it. Not a bad idea provided it also applies to politicians. For example Gordon Brown wrecking our economy and getting away literally Scot-free. There are no punishments for reckless bankers perhaps - but none for world class wasters in government either.

[Adam Bell]

Chris, this seems slightly unfair. I can't find a full version of the speech, but it's not clear that he was actually talking about making it easier to sack workers at all. Rather, it appears that he was talking almost exclusively about entry and exit:

"You can't have room for innovation and the pressure for excellence without having some real discipline and some fear on the part of the providers that things may go wrong if they don't live up to the aims that society as a whole is demanding of them."

"If you have diversity of provision and personal choice and power, some providers will be better and some worse. Inevitably, some will not, whether it's because they can't attract the patient or the pupil, for example, or because they can't get results and hence can't get paid. Some will not survive. It is an inevitable and intended consequence of what we are talking about."

I think you may have been taken in by sloppy/malicious reporting by the Guardian

[A1]

I was going to agree with a couple of things in Chris's article and explain that while behavioural economics books are faddish in Tory circles, no one actually reads them.

But then I read the comment from Pablopatito and now I have to talk about that. He's right, of course, there are now more targets, and there are bonuses etc. But the chance of being made redundant in the public sector is still a tiny fraction of what it is in the private sector. Flexitime and DB pensions still far more common. Well paid parental and sick leave. Etc.

I'm sure what Letwin meant is "imagine a system where the state funds public services, but they are provided by independent providers, be they charities, social enterprises, or God forbid profit making companies. Then it is only through some real discipline and some fear of another supplier offering a better service and thus putting you out of an income stream that real excellence would be achieved in the public sector".

Chris - to what extent would you disagree with that?

[pablopatito]

"some fear of another supplier offering a better service"

Sure, but will this ever be the case? The barriers to entry in public service provision seem high, leading to monopolistic practices.

I'd hoped for a better service when British Gas was privatised, but I can't say I've noticed nPower living in fear of me. Will it be any different when Capita take over my local NHS trust? I doubt it.

[Shuggy]

"For example, if teachers are sacked if their students perform poorly, the result might not be better teaching, but rather teaching to the test, the expulsion of bad students, or a focus on students of borderline ability, to the neglect of most of the class."

As someone remarked above, Letwin is an idiot. Teachers can already lose their jobs if their student do not perform well so many are motivated, as one might expect, to do what they can to avoid losing their jobs. I find it funny when conservatives of various stripes talk about the 'real world', yet are so amazingly ill-acquainted with it that "kissing lots of ass" doesn't form part of their understanding of how people behave when they fear for their jobs.

[Mil]

@Shuggy And that kissing lots of ass actually leads to tremendous amounts of waste. The fear I felt whilst working in the private sector drove me as a humble data processor to endanger my health as I strove to hit productivity and quality targets - making me I suppose far more efficient than I otherwise might have been. But the very same fear felt by top-level executives and upper-middle management led to a patterned sequence of spending decisions on big projects which would - in an equally patterned way - be overturned, quashed halfway through or simply dropped with little if any acknowledgement from the hierarchy.

The fear of being found out, then, was what drove them to *their* waste.

Fear is bad all round. There are far more positive 21st century ways to engender engagement and identification with a project than the 19th century horror of losing everything.

[IT]

On your final point about entry and exit, many (?most) efficiencies in health care come about because of medical scientific research which is a proxy for entry and exit. So, you miss out a vital part of this specific process ... Maybe in other fields it comes from things like new design.

[RJ]

I have to agree with IT in that respect: scientifc research is the cornerstone of any advancement.

[ייעוץ זוגי]

Fear does not cause a greater effort, this effort will be flawed if the institutional structure is very carefully designed. Fear of job loss may simply lead to more games of this system.